HMRC Offshore Account "Amnesty"
HMRC Offshore Disclosure Facility
You may well have seen suggestions in the press over recent months that HM Revenue and Customs (HMRC) were about to announce an amnesty, or something similar, for people with undeclared offshore accounts.
Following a recent legal victory, HMRC have used their powers to request offshore account information from a number of the large banks and have indicated that they are going to vigorously pursue any unpaid tax on items such as gross interest received from offshore accounts etc. HMRC have also indicated that they will consider pursuing unpaid tax dating back 20 years unless the amounts involved are ‘trivial’ – although trivial is not defined.
HMRC have however announced that they are offering a ‘facility’ to tax payers that might be affected whereby they will limit any penalty charged on unpaid tax to 10% so long as any disclosure is made and the tax paid by 26 November 2007. If the total amount of unpaid tax involved is less than £2,500 then the 10% may be waived – but that does not mean that the tax and any accrued late payment interest will be waived and the disclosure and required tax/interest payment should still be made.
There is also a similar, parallel, procedure for dealing with the reporting of previous underdeclarations which do not have any offshore connections.
In order to take advantage of this facility a notification must be submitted to HMRC by 22 June 2007 stating that the taxpayer wishes to use the facility although the actual figures and tax payment will not be required until 26 November.
Obviously this whole issue is fairly delicate for any taxpayers involved and indeed for any agent or adviser acting on their behalf. From our own perspective, there is always a presumption that a full disclosure of income has been made to us by the client in order that we can prepare the necessary tax returns and advise of any tax due.
However, we are aware that in some cases, taxpayers have assumed that interest received on offshore deposits would not be taxable and not mentioned any offshore accounts to us. We are also aware that an increasing number of clients have personal or business interests outside of the UK or perhaps own property abroad and we feel obliged to bring the recent HMRC initiative to the clients’ attention should there be any issues that need to be discussed with the client.
As this matter is not being directly publicised by HMRC and is only attracting public attention through the media we also feel that we should play our part in bringing this matter to clients’ attention for general information which clients may then circulate through their own circle of family, friends and business associates given that the deadline to take advantage of the Revenue’s voluntary disclosure scheme is fairly tight.
Where taxpayers have received gross interest on offshore accounts then it may be that, although unwelcome, any additional tax payable may not be that great in overall terms depending on the amounts held in the offshore accounts.
However, if any disclosure is required, this does lead to a secondary and perhaps more significant issue relating to the origin of the funds held offshore.
If the offshore funds have been accumulated over time or from a specific transaction from income or gains that have already been subject to tax then it is only any unpaid tax on the interest that needs to be disclosed. If, however, the offshore funds have resulted from income or gains that have not previously been disclosed or taxed then the taxpayer would need to consider a full disclosure and payment of tax in that respect also. If, a disclosure is made in respect of interest only where the amount of interest declared indicates that the offshore funds are significant then it may be that HMRC will follow up with enquiries as to the origin of the funds in any event.
Given the fairly tight deadlines, if you feel that any of these matters are relevant to your own situation or you would like to discuss the matter in more detail then please contact us as soon as possible.